Property Price + VAT, how to treat the VAT

Guest007

Hello All,

One of our clients wants to buy a commercial property but the property price includes NET+VAT= total price.

Now, does he need to register first for VAT then buy the property and claim the VAT back? Or he can buy the property and get registered for VAT and claim the VAT back.

Did I miss any other possible situation here?

Please share your knowledge.

Regards,

jamesm96

Guest007 wrote: »

Hello All,

One of our clients wants to buy a commercial property but the property price includes NET+VAT= total price.

Now, does he need to register first for VAT then buy the property and claim the VAT back? Or he can buy the property and get registered for VAT and claim the VAT back.

Did I miss any other possible situation here?

Please share your knowledge.

Regards,

Hi Guest,

Either, basically.

If he registers for VAT first then (assuming there's no partial-exemption issues or the suchlike) he'd just put the VAT on his first return (or the first return after completion).

Or, if he buys before completing VAT registration then he can still recover the VAT on his first return under the rules for pre-registration input VAT (and, being a capital item, he'll potentially be able to claim back the VAT on any pre-registration capital expenditure up to 10 years before registration).

What I would say, though, is that if at all possible it'd be better if it were possible to buy the building as a 'transfer of a going concern'. If that can be done then the vendor need not charge VAT at all which saves having to find the cash to cover the VAT until HMRC repay it, and also (as far as I understand) reduces the stamp duty because the SDLT is then calculated on the net cost rather than the gross.

Who owns the building at the moment, what is it used for? And what will your client use it for?

villapb

hi guest, i watched one of guys deal with this a couple of weeks back, the seller opted in, likely to claim back vat on refurb costs etc, but you cant opt out, hence the vat on the sell. If your client opts in he will have the same situation and cant opt out on the property, so will have to charge vat on rent etc and if also they sell the property. I saw also where a mortgage at a low rate was taken out on the property and a high interest loan to cover the vat.........but hmrc dont half take their time repaying the vat lol...........the situation i saw was to demolish pubs and re build so transfer of going concern was out the window, but james is spot on if transfer can be done, ie rental flats etc as a business or shops for rent.

deanshepherd

You can revoke an option to tax after 20 years. If the seller has owned it that long then maybe they will be nice and revoke their option prior to sale..